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The ‘Amazon of Latin America’ Charges Toward Buy Point

With the pandemic continuing to drive online shopping, Mercado Libre (MELI) has posted sales growth ranging from 38% to 111% over the last eight quarters. Now MELI stock is just shy of a new breakout. Amazon.com (AMZN) is also setting up.




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Known as the Amazon of Latin America, Mercado Libre hosts the largest online commerce and payments ecosystem in the region. The company operates in 18 countries, including Argentina, Brazil, Mexico, Colombia, Chile, Venezuela and Peru. Based on unique visitors and page views, the online shopping and payments platform is a market leader in each of the major countries where it has a presence.

Not surprisingly, the market capitalization for AMZN stock ($1.8 trillion) dwarfs that of MELI stock ($95 billion). But strong sales growth isn’t the only thing attracting the best mutual funds such as Fidelity OTC (FOCPX). In fact, 225 funds with an A+ rating from IBD own MELI stock.

Top money managers are also watching Mercado Libre’s turnaround in earnings. After showing a loss in the two prior quarters, the Argentina-based e-commerce company posted a 23% EPS increase on Aug. 4.

For the current quarter, analysts expect a 311% rise in earnings. Looking ahead to 2022, analysts estimate a 169% spike in earnings next year.

The outlook for earnings and sales growth, as well as the technical action in the chart, has earned MELI stock a spot on IBD Leaderboard.


See Who Joins MELI Stock On IBD Leaderboard


MELI Stock Tests Buy Point As AMZN Stock Bases

Mercado Libre is trying to charge past a 1,899.43 buy point in a third-stage cup-with-handle. It remains a later-stage consolidation because the low in the current chart pattern did not undercut its prior low to reset the base count. So while not technically an early stage base, the 38% decline within the current pattern has some characteristics of a refresh.

During that substantial decline, the relative strength line for MELI stock fell sharply. But the RS line has rebounded off its lows.

Mercado Libre stock showed nice spikes in volume for the weeks ended Aug. 6 and Aug. 13, indicating strong demand as the stock continued to set up.

Early Monday, MELI stock briefly poked its head above the buy point but has since pulled back.

As AMZN stock jumps Monday and tries to retake its 50-day moving average, see if Mercado Libre can retake its buy point in heavy volume.

Follow Matthew Galgani on Twitter at @IBD_MGalgani.

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